Legislators Choosing Taxes of Least Resistance
Raleigh, N.C. – If history is any judge, the current tax package soon to be approved by the Governor and General Assembly will harm the state’s ability to recover from the recession and will cost North Carolina jobs in future.
“If elected officials continue on the path to tax increases, there is no doubt North Carolina’s economic recovery will suffer,” said Civitas Institute Budget Analyst Brian Balfour. “After the General Assembly raised taxes during the 2001 recession, unemployment and personal income growth in North Carolina lagged the national average. Other states that resisted tax increases were given an advantage by North Carolina’s reckless tax increases.”
- North Carolina’s annual unemployment rate overtook the national average in 2001, and has remained there ever since. By contrast, for the 25 years prior to 2001, North Carolina’s annual unemployment rate was higher than the national average only once.
- Per Capita income growth from 2001 to 2007 in North Carolina was 22.4 percent, less than the national average growth rate of 26.3 percent and second lowest among Southeastern states. As a result, North Carolina’s per capita income dropped from 31st highest to 36th highest in the U.S.
For more on North Carolina’s economic performance over the past eight years see: Grading The Last Eight Years of Leadership in Raleigh: Is North Carolina Better Off?
It also appears that legislators, in adopting many of Governor Perdue’s proposed tax increases, including raising the sales tax and taxes on alcohol and tobacco, are choosing the taxes that are least politically damaging according to Civitas polling. According to Civitas’ April 2009 polling, 84 percent of voters agreed that when it comes to taxes, everyone should pay something. Polling has also consistently shown sin taxes to be the most politically popular taxes to increase.
“As legislators wrap up work on this $990 million package of tax increases it appears the path to reelection rather than the path to economic recovery has driven their decision making,” said Civitas Institute Senior Legislative Analyst Chris Hayes. “Legislators are reading the polls and picking the taxes of least resistance.”
Voters however do not believe that the Governor and legislators have made the case for tax increases. 79 percent do not believe that all has been done to remove wasteful spending from the state budget in order to prevent the need for a tax increase.
“While they are choosing the most politically expedient taxes to increase, voters are still not convinced of the need, nor do they have the appetite for tax increases,” added Hayes.
The Civitas Poll is the only monthly live-caller poll of critical issues facing North Carolina. For more polling information on Civitas polling see www.nccivitas.org/media/poll-results/.
Full text of questions:
Do you believe Governor Perdue and the state legislature have done all they can to remove wasteful spending from the state budget in order to prevent the need for a tax increase?
Yes – 11%
No – 79%
Not Sure – 10%